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Market News Tech selloff hits Nasdaq, Powell comments limit declines

Tech selloff hits Nasdaq, Powell comments limit declines

Tesla drops as much as 13%, turns negative for the year; Powell Pledges to Maintain Economic Support! Bitcoin extends its slide, and related stocks tumbled.

Eden
2021-02-24
664

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Wall Street’s main indexes opened lower on Tuesday as investors sold off high-flying growth stocks on valuation concerns ahead of Federal Reserve Chairman Jerome Powell’s testimony before Congress.


The Dow Jones Industrial Average fell 19.8 points, or 0.06%, at the open to 31501.89. The S&P 500 fell 19.4 points, or 0.50%, to 3857.07, while the Nasdaq Composite dropped 270.4 points, or 2.00%, to 13262.607 at the opening bell.


The sentiment was bolstered by Fed Chair Jerome Powell, who on Tuesday signaled the central bank was nowhere close to unwinding its easy policy. The best U.S. performers were airlines, lodging companies and cyclical shares set to benefit from the end of pandemic lockdowns, while the tech-heavy Nasdaq 100 closed lower despite a late rally.


Powell voiced cautious expectations for a return to more-normal activity later this year and said that higher bond yields reflected economic optimism, not inflation fears. That helped fuel a return of the buy-the-dip mentality that has limited equity drawdowns in recent months, with investors betting on a global economic recovery spurred by vaccines and U.S. spending.


Powell’s comments reassured investors about interest rates, helping the market recover some losses.


Tesla suffered steep losses at the opening bell on Tuesday as investors rotated out of high-flying tech names, although throughout the session Tesla, in addition to Big Tech, clawed back the majority of the day’s early losses.


Shares of the electric vehicle maker dipped as much as 13% — the stock’s worst day since September — before bouncing back from the low. Shares finished the session 2.19% lower.


Tesla shed 8.55% on Monday. With Tuesday’s losses, Tesla turned negative for 2021.


Bitcoin slumped as much as 18%, to $45,000, on Tuesday before slightly paring losses.


PayPal Holdings (PYPL), and Square (SQ), to name just a few, are trading in tighter correlation to the bitcoin are down by 5% and 8%, respectively.


Square bought $170 million worth of bitcoin, the company revealed in its fiscal fourth-quarter financial report Tuesday.


The company said it purchased approximately 3,318 bitcoins, expanding on its October 2020 buy of 4,709. Square said it represents about 5% of the company’s total assets as of the end of 2020.


“The investment is part of Square’s ongoing commitment to bitcoin, and the company plans to assess its aggregate investment in bitcoin relative to its other investments on an ongoing basis,” the company said in its earnings release. Its CEO, Jack Dorsey, as also been an advocate of the digital currency.


Companies are increasingly leaning into bitcoin as it becomes more mainstream. 


AMC Entertainment – Shares of the movie theater chain jumped 17.6% on Tuesday after New York Gov. Andrew Cuomo announced that movie theaters in New York City could open with limited capacity next month.


Spotify – Shares of the music streaming company fell 3.9% after Atlantic Equities downgraded the stock to neutral from overweight on valuation concerns. The firm cited Spotify shares that have more than doubled over the past 12 month, trading at more than five times forward revenue. Meanwhile, it said there are fewer catalysts to drive shares higher as Spotify’s focus shifts away from M&A to production.


Occidental Petroleum – The energy stock slipped 1.6% after Occidental’s fourth-quarter results missed estimates on the top and bottom lines. The company reported a loss of 78 cents per share on $4.16 billion in revenue. Analysts surveyed by Refinitiv were expecting a loss of 59 cents per share on revenue of $4.37 billion.


Apple (AAPL-US) fell 0.11%; Facebook (FB-US) rose 2.12%; Alphabet (GOOGL-US) rose 0.29%; Amazon (AMZN-US) rose 0.43%; Microsoft (MSFT-US) fell 0.53% .


Facebook (FB) has reached an agreement with the Australian government and will restore news pages in the country days after restricting them. The decision follows negotiations between the tech giant and the Australian government, which is set to pass a new media law that will require digital platforms to pay for news.


CNBC’s Jim Cramer advised that market players have two ways to approach high-flying growth stocks that teetered and tottered their way through a volatile session on Wall Street Tuesday.


Investors can choose to join in on the selloff that has dropped some tech names like Apple into negative trading territory this year.


The other choice — taking a cue from Federal Reserve Chair Jerome Powell’s restated commitment to leave interest rates at low levels — is to hold on for the ride and consider loading up on worthy stocks discounted from their highs, Cramer said after the market closed mixed.


“I’m happy to entertain the idea that you need to ring the register here, but I happen to like growth stocks in a reflation scare. I like growth stocks when risk is on. I like growth stocks when risk is off,” Cramer said.


“If you want to hold on to the growth stocks … you have to be prepared to take some pain, just like in late 2015 and early 2016 — that was the last great moment to buy these stocks — or you can just do some selling if you want to and try to swap back in at a lower level,” he added.


The market has toiled through a rotation as investors swap growth and tech stocks that outperformed throughout the pandemic for value plays of companies that are expected to see business return as the economy reopens. The Nasdaq is now 4.5% off its closing high earlier this month.


Worries that an inflation revival could trigger the Fed to raise interest rates, as it did in twice in a three-month span between 2015 and 2016, shook investors out of growth stocks in recent days, Cramer said. Higher rates pose a challenge to growth and utilities stocks.

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